I HOLD THIS TRUTH TO BE SELF-EVIDENT, THAT A DEBT CRISIS CANNOT BE RESOLVED WITH MORE DEBT

Wednesday, November 11, 2009

Calling Archimedes

Within 6 hours deserts receive more energy from the sunthan humankind consumes within a year.

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Prompted from the previous post about Dubai, today's post is about a quiet revolution planned for the deserts of North Africa. It's called DESERTEC and it's a pretty simple concept: harvest the massive amounts of solar energy in that region, turn it into electricity and send it across to Europe via cable.

The basic technology is quite old and proven: Concentrated Solar Thermal Power (CSP), i.e. using mirrors to concentrate sunlight, generate steam and thus drive turbines and electrical generators. The crucial difference between this and direct conversion of sunlight into electricity via photovoltaic panels, is that heat can be stored in media exhibiting high heat capacity (e.g. salts) and used to generate electricity 24/7, even when there is no sunlight. In addition, waste heat (i.e. lower enthalpy steam) can be used to desalinate water or drive cooling systems.

If you think that this sounds a bit like "pie from the sky" (sic), think again: a few days ago twelve of the world's largest companies signed on to the project, including the likes of Siemens, ABB, RWE, E.ON, MAN, Munich Re, Deutsche Bank and ABENGOA, bringing the project one step closer to becoming reality. The thumb-prints of Germany are all over this consortium, as one would expect from the largest EU member that is also forward-looking and firmly committed to alternative energy and infrastructure transformation.

This type of massive, game-changing project rings a huge wake-up bell: the days of debt-fuelled consumer spending growth are over. The economic paradigm for the next hundred years will be based on huge infrastructure spending, to radically transform energy sourcing, generation, transmission, storage and utilization.

Please keep this simple maxim in mind:

Energy is the biggest business of them all, by a long shot.

(If you have any doubts, I strongly urge you to readThe Prize , Daniel Yergin's Pulitzer Prize winner about how oil companies and producers came to dominate our world.)

I am hopeful that after wasting resources* on financial bailouts (perhaps a necessary evil), our societies will see the light and now shift to productive and responsible courses of action.

* (Well.. it's only fiat money, actually, so the damage is mostly limited to the public's perception of policy priorities, i.e. propaganda. But such perception makes a big difference to the success or failure of necessary initiatives.)

What does this mean for investors with longer-term horizons?

Avoid the consumer non-essential sectors. By definition, societies will have to save more in order to finance these projects and will thus have less to spend on non-essentials.

17 comments:

And of course US companies are conspicuously absent from that list. It makes me want to scream. Here I sit, a system and board designer with stream plant experience and almost zero chances of working on a job like this because this country has no real energy policy other than "drill baby, drill".

Sigh... let's be optimistic.Huge infrastructure expenses = levying taxes at a time when propaganda has made them a dirty word.And... "nonessential consumer spending" ??? Does that mean "the arts" get axed ?I already feel persecuted with a liberal arts education...

A few thoughts.1. After a couple of trillion Euros in investment you want to be sure no local dictator takes over your project. ie. you need to own the ground it is build on which could prove difficult and/or costly.2. You need to guard the place 24/7. Northern Africa is full of people that would like to blow your stuff up.3. You need to get the electricity from northern Aftrica through the Mediterranian to Europe. This is actually a much bigger challenge than the solar power plant. It can be accomplished via direct current high voltage lines. They lose "only" about 5% per 1000 miles. So you're looking at about a 10% drop.

Points 1 - 3 are very crucial but nothing a couple of trillion dollar couldn't solve. The kind of money we spend on banksters, C4C, wars and other ill conceived projects.By the way Uncle Sam went $176 billion in the hole just for the month of October.http://money.cnn.com/2009/11/12/news/economy/treasury_monthly_deficit/index.htm

Oh yeah, the US has it easy as we don't need to worry so much about items 1 & 2. But of course we rather spend our cash on projects that generate absolutely no long term dividends. Looks like Obama is even crazier than GWB, too bad.

We have huge tracts of BLM Land here in the south western deserts and also several solar power complexes running, so I think the future is brighter than you might you might think for solar power here, especially if we can double up with desalination, two birds with one stone if ever there was one.

As a European, I sometimes get the feeling that Africa, at least is... fed up with the interminable fallout from European colonization, and the ill disguised contempt that European leaders (at least French leaders, excepting Jacques Chirac...) show for the "dark" continent. We will see if all of us "nantis" manage to continue pulling the wool over our cousins' eyes, by once again pillaging THEIR resources for OUR comfort.

In My Opion, we are fed up with each other. Africa is always in some state of messy brokeness compared to Europe so the doo-gooders and world-improvers will just never run out of projects to inflict upon the taxpayers here and the population there.

IMO, We would like each other MUCH more if we stopped telling each other how to live and just satisficed ourselves with going as tourist and marvel over the strange ways of the foreign people.

"Daniel Yergin's Pulitzer Prize winner about how oil companies and producers came to dominate our world."

Hmmmm...interesting statement devoid of any truth. As far my tiny brain can process information, banking companies had been dominating the world for last 150 years (entire life-span of oil). Even though Rockefeller was lot wealthier than JP Morgan, JP was lot more powerful. In recent times, did you find US government change all kinds of rules to protect XOM from releasing toxic materials into the environment?

About Me

I was educated as a chemical engineer but spent almost my entire career in finance, particularly in money, FX and bond markets. The name stands for Hell-as-IOUs and the picture points to Quixotic endeavors.